Dow Jones Expects Fed Highs While Nasdaq and S&P 500 Records Fall

The DOW JONES rose 0.18% to 38,538, while the S&P 500 fell 0.50% to 4,900. The NASDAQ 100 fell 1.10% to 15,339.

Yesterday, Tuesday, was a mixed day on Wall Street. The S&P 500 fell 0.06% and the Nasdaq Composite lost 0.76%. The Dow Jones Industrial Average distanced itself from the decline and rose 0.35% to hit new record highs.

The Federal Reserve’s monetary policy meeting will be the central topic of the day. The fed funds futures market is pricing in a nearly 98% chance the central bank will leave rates unchanged, according to CME’s FedWatch tool. So, barring a major surprise, interest will be focused on Fed President Jerome Powell’s follow-up news conference, where investors will be looking for clues about when interest rates might start to fall.

Monetary authorities will likely take a “later, smaller approach,” with the Federal Reserve cutting rates later than most of the market expects, said Sam Stovall, chief investment strategist at CFRA Research. “The Federal Reserve does not want to repeat past mistakes of cutting rates too aggressively.”

In fixed income, which is always very sensitive to monetary policy, the US 10-year yield falls two points to 4.03%. The yield on two-year bonds, which pay 4.328% on the secondary market, is also moving down.

On the macroeconomic agenda ADP’s employment report shows the private sector added 107,000 jobs in January, well below the 150,000 expected. analysts and from 158,000 (revised data) in December. In its turn, labor costs rose 0.9% in the fourth quarterwhich is slightly below expectations (1.0%).

Meanwhile, the quarterly results season continues with two of the Fab Seven, Microsoft and Alphabet, releasing their results yesterday after the close of the regular session. Although both companies beat market expectations, the reports were met with a cool reception, with declines of more than 5.5% for Alphabet and 0.4% for Microsoft.

Microsoft reported earnings of $2.93 per share on revenue of $62.02 billion. Analysts had expected earnings of $2.78 per share and revenue of $61.12 billion. Revenue from Azure and other cloud services increased 30% annually.

For its part, Alphabet posted earnings per share of $1.64, compared with expectations of $1.59. Revenue amounted to 86.310 million, also exceeding expectations of 85.330 million. However, Google’s advertising revenue was $65.52 billion, missing analysts’ expectations of $65.94 billion.

The fall in shares of Alphabet and Microsoft, despite the companies’ mostly positive results, may be more of a short-term “buy the rumor, sell the news” trend, Stovall said. An analyst at CFRA Research notes that “even when there are better-than-expected results, it’s possible that people are selling because they just want to take the money and run.”

The technology sector, which fueled the market’s rally from 2023 to 2024, is now trading at a relatively high price, nearly 29 times its 2024 earnings, Stovall said. Given this, investors will need to see earnings growth from tech companies to maintain strong price-to-book ratios, the strategist said.

“It’s not that investors are willing to pay up and get multiple returns later, but now is the time to put up or shut up,” Stovall said. “It’s time to grow earnings to justify those higher valuations.“

The tech sector has also had poor reception for Advanced Micro Devices accounts. Shares of the semiconductor company fell 4.6% after quarterly revenue beat forecasts, but its first-quarter guidance came in below expectations. For the first quarter, the company expects sales of about $5.4 billion, with a shortfall of about $300 million, while analysts had forecast revenue of $5.73 billion.

Today, during earnings season, some components of the Dow Jones Industrial Average, such as Boeing Co, were caught in the eye of a hurricane last month due to problems with some of its models. Actually, The company suspended its 2024 guidance as it continues to deal with the fallout from the Alaska Airlines 737-9 MAX crash. at the beginning of January.

The planemaker reported an adjusted loss per share of 47 cents, compared with an adjusted loss of $1.75 per share a year ago. Revenue rose 10% to $22.02 billion. Quarterly free cash flow fell to $2.95 billion from $3.13 billion. Its shares rose 2.4% at the opening of the session.

Qualcomm will also release its earnings results, but we’ll have to wait until regular sales close to find out the chipmaker’s numbers.

Outside of earnings season, investors will also have to keep an eye on Tesla shares after a Delaware judge overturned CEO Elon Musk’s $56 billion compensation package. The decision is a response to a lawsuit filed by Richard Tornetta, a Tesla shareholder. Shares of the electric vehicle maker fell 2.5% on the stock market.

One of the main heroes of the New York morning is Paramount Global, whose shares soared 14% on the stock market. According to information provided Bloomberg, media mogul Byron Allen has filed a bid to acquire 100% of the media company.

Allen would offer $28.58 for each voting share of the company, a 50% premium to its current level, and $21.53 for each non-voting share. Including existing debt, the total transaction value is approximately $30 billion.

In commodity markets, oil prices are falling due to symptoms of economic weakness in China, the world’s largest crude oil importer. However, escalating tensions in the Middle East led to black gold closing the month with a positive balance for the first time since September.

U.S. West Texas crude futures fell 0.53% to $77.41 a barrel, while European Brent crude fell 0.40% to $82.09 a barrel.

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